Logistics Costs Rising

Wednesday November 2, 2011

Rising services cost a bane for businesses

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

KUALA LUMPUR: Malaysian businesses expect rising services cost and fluctuating exchange rates to be among the top barriers to imports and exports in the next six months, according to findings of the latest HSBC Trade Confidence Index.

In the survey, 52% of Malaysian businesses found the cost of essential services such as shipping, logistics and storage would be the biggest barrier to international trade, followed by fluctuating exchange rates, at 35% and insufficient margins or profitability, at 29%.

Other concerns for Malaysian businesses included government trade regulations, rising interest rates and lack of product demand.

HSBC Bank Malaysia Bhd trade and supply chain director Ng Wei Weisaid that confidence had risen to a positive 106 points in the latest HSBC Trade Confidence Index from negative 97 points in the previous survey. Countries that recorded index points of over 100 are considered “positive,” while those below 100 points are “negative.”

Business concerns: Andrew Grisdale and Ng Wei Wei speaking to the media on the findings of the HSBC Trade Confidence Index.

She said 83% of Malaysian businesses expected trade volume to rise or at least remain unchanged in the next six months.

“In the next six months, 92% of the businesses expect their need for trade finance to rise or remain unchanged and 91% expect their capacity to access to trade to rise and remain unchanged,” she said at a briefing yesterday.

“Despite the rise in confidence in trade, 57% of Malaysian businesses expect the global economy to decline in the next six months,” Ng added.

HSBC managing director for commercial banking Andrew Grisdale said the implementation of key initiatives under the Economic Transformation Programme, combined with the Government’s pro-growth initiatives and regulator’s liberalisation measures would continue to fuel an “optimistic business environment.”

“At HSBC, we see positive growth in trade volumes and we expect growth to be supported by public sector expenditure and domestic private consumption.”

The HSBC Trade Confidence Index covers 21 markets and is the largest trade confidence survey globally.

Of the countries surveyed in Asia, businesses in Indonesia were the most bullish about trade prospects in the next six months with a score of 144 points. This was followed by India and Vietnam with 129 and 115 respectively. Malaysia was the fourth most confident country on the index. The survey comprises the views of 6,390 exporters, importers and businesses from small and mid-market enterprises on trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and the impact of foreign exchange on their businesses.

On another note, Ng said HSBC expected Asian trade to grow 4.8% year-on-year until 2025 versus 3.8% globally.

“Asia trade volumes will grow 96% to nearly US$14 trillion (RM43 trillion) by 2025 and will be the key driver of world trade growth, which is expected to increase by 73% in the same period.

“India, Vietnam, Indonesia and China are among the top five international power houses which will drive world trade growth until 2025,” she said.